Cummins Reduces Sales Forecast, Cuts 2,000 Jobs
Cummins Inc.’s third-quarter profit trailed analysts’ estimates, and the company reduced its annual sales forecast because of weakening demand for its heavy-duty engines.
The company also noted it is cutting 2,000 jobs as part of a plan to save as much as $200 million a year, and Chief Financial Officer Pat Ward said on a conference call that Cummins will resume share buybacks this quarter. Its board authorized a $1 billion repurchase program in July 2014.
Cummins reported quarterly earnings of $2.14 a share on revenue of $4.62 billion, trailing the average estimates of $2.60 and $4.91 billion compiled by Bloomberg News.
Orders in China and Brazil are at multiyear lows with no sign of improvement soon, the Columbus, Indiana-based company said in a statement. Revenue in North America rose 4% compared with an 18% decline in international markets.
“We are taking difficult but necessary actions to lower costs in the face of weak demand in many of our markets,” CEO Tom Linebarger said. “Global off-highway and power-generation markets have been weak for some time and are worsening.”
Cummins said revenue this year will be little changed to down 2% from 2014 after an earlier forecast of an increase of 2% to 4%. The company said it will record pretax costs of $70 million to $90 million this quarter related to the job cuts.
“While we anticipated revenue weakness from off-highway markets, the magnitude of declines from on-highway were more aggressive than expected,” David Leiker, an analyst at Robert W. Baird & Co. in Milwaukee, wrote in a research note. He has a buy rating on the shares.
